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A company is planning to distribute 2$ per share for each share whereas they were paying 1 dollar last year. (the extra one dollar is
A company is planning to distribute 2$ per share for each share whereas they were paying 1 dollar last year. (the extra one dollar is given only once and the company will continue to pay 1 $ afterwards). This information is fully leaked to the public on 23rd of April but the official announcement is made on April 25th. What happens to the share price, increase, decrease or remain similar) under the following theories of dividend on announcement day? Assume ex-date is June 15th. What happens to share price on ex-date. How much the price will decrease or increase on ex-date ? 23-Apr 25-Apr 15-June Modigliani and Miller Irrelevance 0 0 -2 Signaling + 0 -2 Agency + 0 -2 Clientele Effect ( Assuming majority of investors dislike dividend) - 0 -2
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